This blog is devoted exclusively to American jobs and America's labor markets

Friday, May 9, 2014

Jobs in Day Care Centers

A recent article in the Washington Post ["Math 101 for New Parents," WP, 1-10-14] reported the cost of a year of day care in many states exceeds a year of tuition at state colleges. The article cited Child Care Aware of America as a source of information. They publish annual expenses by state for child care centers and family care centers. Expenses are broken out for infant care, 4 year olds, and school age care for the two types of facilities.

While they do not report college tuitions the child care center expenses they report exceed $10,000 for 19 states; the average for the 50 states is $9,466.00. In Oregon, for example, the College Board gives in-state tuition at the University of Oregon as $9,767, compared to $13,452 reported as a year's expenses for infant child care. Expenses reported for 4 year olds and for school age children tend to be lower. In Oregon the expenses reported for 4 year olds dropped to $10,200 and to $5,028 for school age children. School age children need after school care rather than all day at least during the school year.

Licensed day care costs include rent, supplies, maintenance, toys-equipment, liability insurance, utilities but wages for staff make up the biggest share of a day care program budget. The Bureau of Labor Statistics confirms staffing information also reported on the Child Care Aware website. Both report that three occupations account for 76 to 80 percent of employment at child care centers: preschool teachers, teacher assistants and childcare workers.

Preschool teachers have the highest median wage of the three occupations at $27,570 in 2013, up from $22,680 in 2006. The increase of wages exceeds the rate of inflation by enough to raise buying power by 5 percent over the 8 year period. States do not require a BA degree or teacher certification for the lead teacher in a pre-school. Training hours in early childhood education or child development activities are required in 19 states, but 31 states allow a high school education or less than high school as training for a preschool teacher. The low entry requirement to work in day care makes it unnecessary to compete with the public schools for certified teachers and assures a large pool of labor to help keep wages low.

Teacher assistants have a median wage of $24,000 in 2013, up from $20,740 in 2006. To have the buying power of 2006 in 2013 the wage would need to be $23,965, which makes $24,000 a tiny increase in buying power for teacher assistants for the 8 year period.

Child care workers make up a little over 30 percent of staffing but they have the lowest wages of the three occupations with a median wage of $19,700. To have the buying power of the 2006 median wage of $14,630 in 2013, the median wage would need to be $20,372. Instead it was $19,700 a 3.8 percent decline in buying power over the 8 years.

State licensing rules limit the number of children per staff, the child to staff ratio. For children in infant care some states allow 6 children per staff in; some states allow only 3 per staff. The ratio goes up for older children. For school age children the maximum for some states is 25 per staff; the low for others is 9.

With six to one staff 30 children in infant care need to have one lead teacher and four other staff ready to assist suggesting payroll expenses of $127,644 a year that allows for 20 percent extra to pay Social Security taxes, workman’s compensation and so on. [i.e. ($27,570 + 4 x $19,700)*1.2 = $127,644 ] A day care center with 30 children and the average charge of $9,644 can generate revenue $284,000, and over $400,000 with charges like Oregon. The difference of revenue and payroll suggests an adequate margin for expenses and maybe a little extra.

Some of the revenue paid to day care centers comes from the Child Care Development Block Grant program and Temporary Assistance to Needy Families (TANF), the Clinton Administration replacement for welfare, but Child Care Aware of America reports 60 percent of revenues come directly from parents.

If a couple that both earn $45,000 salaries then social security and joint federal income taxes generates taxes of $19,338.75. Adding in the average day care expense of $9,644 brings the total to $28,982.75. If one stays home and the other continues at $45,000, taxes drop to $6,411.25 including a small child care tax credit of $250. When both work they are left with $61,017.25 when one works they are left with $38,588.75. Therefore $45,000 additional income from a second salary adds only $22,428.75 to net income and the difference of $45,000 - $22,428.75 equals the cost of working and paying for child care, which in this example is $22,571.50.

Child Care Aware of America tells website visitors they are the nation’s leading voice for child care. They also write “A major hidden funding source for child care subsidies are the teachers in child care centers and family child care homes. . . . In effect, the low wages of the early care and education workforce serve as a subsidy for parents.”

It’s nice they are honest, but those working do earn enough to be self supporting. High prices and low wages are getting to be an old story in American job markets.